Simultaneous Sign And Close Agreement

M&A transactions typically follow either account closure or the locked box mechanism. In addition to possible adjustments to purchase prices, the main difference is the time of economic transfer. It may be retroactive to a given time before the signature or to the closing date. The structure of the accounts and liabilities after the closing of M&A transactions should be taken into account at an early stage of the trading process, as they will strongly influence the provisions of the operational transaction agreement. Once an agreement has been signed, the parties concerned will have to take all necessary measures to ensure that the agreement is successful. These conditions precedent are defined by both parties before signing and may be based on country-specific rules. In many cases, obtaining an antitrust authorization is the only – or at least the most relevant – of the conditions. All other non-legal terms are left to the discretion of the buyer and seller and depend largely on their bargaining power. In a locked box mechanism, the buyer offers a purchase price based on a historical balance sheet (the “locked box balance sheet”). This means that the economic transfer of the business – that is, the point at which the buyer is entitled to the profit and loss of the business – is retroactive to a date before signing. In the early stages of an agreement, it is not certain that the closure will be postponed.

In this case, you may need to design a deferred conclusion in order to keep your options open – it would be difficult to turn an agreement from a simultaneous signing and closing structure into a deferred closing structure. But if you find that you are able to sign and conclude at the same time, I would delete the contract accordingly…

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